Virtual Banks

The need for a physical bank location to transact day-to-day business seems to diminish every year. ATM machines are ubiquitous as a source of cash or information. Check/Debit cards can be used almost everywhere—no new checks to periodically order. More deposits now go directly into your account without a need to make a trip to the bank. More people are banking online. More people are paying their bills online. And more people are accessing their trust/investment accounts online. With all this activity happening away from the bank, it makes me wonder why I keep seeing bank branches still being built/added at a healthy rate.

The reason, of course, is that for every person who is availing themselves of the ease and convenience of banking online, there is another bank customer that is still doing things the old way. Some people still like to write checks. I do find myself getting impatient when I am behind someone in a checkout lane and they are writing out their check in what seems to be slow motion. Some people still like to deposit their money in person. And for some people, a trip to the bank is a social occasion. According to research at Pew Internet and American Life Project, 43 percent of Internet users do their banking online, or about 63 million Americans. This still leaves a lot of Americans doing things the traditional way.

According to this New York Times article, more people are paying their bills online, too. In fact, the people paying bills online and the people paying by check are almost even. People who pay their bills online can be a revenue source for banks, and it also saves them transactional costs.

Banking is inexorably moving online, but the rate of increase is slowing. In the meanwhile, banks will have to do the same thing many other businesses have done. They will have to adjust to the new world of the Web and technology, while still providing traditional services to a large segment of the population that wants to do things the way they’ve done them in the past.